May 29, 2019 / 1:31 PM / 6 months ago

CANADA FX DEBT-C$ steadies near 5-month low ahead of BoC rate decision

    * Canadian dollar touches weakest since Jan. 3 at 1.3523
    * Price of U.S. oil falls 2.7%
    * 2- and 10-year yield gap hits narrowest in nearly 12 years

    TORONTO, May 29 (Reuters) - The Canadian dollar was little
changed against the greenback on Wednesday ahead of a Bank of
Canada interest rate decision, with the loonie recovering from
near a five-month low earlier in the session when investors
worried about trade tensions.
    Global stocks          and the price of oil, one of Canada's
major exports, fell as China signaled it would use the rare
earths card in its trade war with the United States, stoking
concerns that an ongoing stand-off could hurt the global
economy.                         
    U.S. crude oil futures        were down 2.7% at $57.53 a
barrel.
    Uncertainty due to trade conflicts has worried the Bank of
Canada, which is widely expected to leave its benchmark interest
rate unchanged at 1.75%. The rate decision is due at 10 a.m.
(1400 GMT).             
    The central bank, which has kept the policy rate on hold
since October after having tightened it by 125 basis points
since July 2017, has forecast faster growth over the coming
months after what it expects was barely any growth in the first
three months of the year. Canada's first-quarter gross domestic
product data is due on Friday.
    At 9:13 a.m. (1313 GMT), the Canadian dollar          was
trading nearly unchanged at 1.3490 to the greenback, or 74.13
U.S. cents. The currency touched its weakest intraday level
since Jan. 3 at 1.3523.
    Toronto's stock market           will nudge higher over the
rest of the year, but investors will need to wait until the
second half of 2020 for the index to better April's record peak
as global trade tensions weigh on company earnings, a Reuters
poll found.              
    Canadian government bond prices were mixed across a flatter
yield curve, with the two-year            down 1 Canadian cent
to yield 1.543% and the 10-year             rising 6 Canadian
cents to yield 1.568%.
    The gap between the 2- and 10-year yields narrowed by 1.2
basis points to a spread of 2.5 basis points in favor of the
longer-dated bond, its narrowest gap since August 2007.

 (Reporting by Fergal Smith
Editing by Paul Simao)
  
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